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SUB CATEGORIES Credit Bureaus  |  Credit Insurance |  General | 

Not all customers are good for business

25 May 2015 Michelle Beetar, Experian SA
Michelle Beetar, Managing Director of Experian SA.

Michelle Beetar, Managing Director of Experian SA.

Experian South Africa provides advice to SME’s on credit and their customers.

In an effort to assist small businesses by educating, encouraging and assisting SMEs to achieve and maintain a high level of credit worthiness, Experian South Africa is partnering with the National Small Business Chamber (NSBC) to host a series of ‘Credit Wellness Workshops’ at the 2015 national My Business Expo.

The aim of small businesses is growth, so the acquisition of new customers is key. Yet the risk of taking on new customers that may fail to pay is a huge area of concern.

“Finding new customers can be a challenge, while finding profitable customers is even more so,” says Michelle Beetar, Managing Director of Experian SA. “Businesses are operating in a riskier environment than that of a decade ago, and one of the biggest challenges today is finding customers that will continue to pay their invoices.

“Businesses face reputational and financial risks when they target companies that will not be able to pay their bills. This begs the question, if a firm knew in advance that a potential customer wasn’t going to pay their invoice, would they still pursue their business?” says Beetar.

Taking on the wrong kind of customers could have a negative effect and ultimately harm a business’ chances of survival. Experian advises small firms looking for new clients to not simply target every potential prospect in their region without first delving deeper into the impact those businesses could have on their own operations.

Through the use of credit risk data, high-risk businesses can be vetted and managed more cautiously. This enables small businesses to ensure their resources are more focused and effective, reducing unnecessary expenses in targeting unsuitable prospects.

Alternatively, should a customer with a higher risk profile prove vital to a firm’s success, small businesses can use this data to delve a little deeper. By targeting them with payment terms and conditions that are better suited to them or by agreeing on upfront deposits before goods or services are dispatched, businesses will be able to continue to take on new customers, while mitigating their exposure to financial risk.

“There is a lesson for all firms in terms of creating and enforcing robust credit management and collection policies, so that companies do not leave payment to chance,” says Beetar. “Goodwill goes a long way in business relationships, but ultimately firms need to pick up the money that they are owed promptly or they risk encountering serious cash flow issues.”

The next Credit Wellness Workshop will be held in Durban on 4 June at the Durban Exhibition Centre. For more information please visit https://www.mybizexpo.co.za/index.html

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